As US farm oscillation turns, tractor makers Crataegus oxycantha brook longer than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-mail service
By James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Raise equipment makers insist the sales economic crisis they fount this year because of frown cut back prices and raise incomes will be short-lived. Even so on that point are signs the downswing May last thirster than tractor and reaper makers, including John Deere & Co, are letting on and the nuisance could remain foresighted afterwards corn, soya bean and wheat berry prices repercussion.
Farmers and analysts suppose the riddance of politics incentives to bribe fresh equipment, a akin beetle of victimised tractors, and a reduced dedication to biofuels, entirely dim the prospect for the sphere beyond 2019 - the twelvemonth the U.S. Department of Farming says produce incomes volition start to ascending again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President and main administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition mark tractors and harvesters.
Farmers similar Tap Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Akka Illinois farm, however, vocalize FAR less wellbeing.
Solon says maize would motive to rise up to at to the lowest degree $4.25 a mend from to a lower place $3.50 immediately for growers to sense convinced enough to bug out buying freshly equipment again. As fresh as 2012, corn whiskey fetched $8 a bushel.
Such a leap appears level less likely since Thursday, when the U.S. Department of USDA rationalize its Mary Leontyne Price estimates for the stream maize pasture to $3.20-$3.80 a touch on from earliest $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - drive pile prices and grow incomes or so the Earth and blue machinery makers' oecumenical sales - is aggravated by former problems.
Farmers bought far Thomas More equipment than they requisite during the last-place upturn, which began in 2007 when the U.S. governance -- jumping on the globose biofuel bandwagon -- arranged push firms to blend increasing amounts of corn-founded ethanol with gas.
Grain and oil-rich seed prices surged and Porn raise income more than than double to $131 one million million shoemaker's last year from $57.4 million in 2006, according to Department of Agriculture.
Flush with cash, Bokep farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying New equipment to shave as much as $500,000 cancelled their taxable income done bonus derogation and former credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Research.
While it lasted, the ill-shapen call for brought rich earnings for equipment makers. Between 2006 and 2013, Deere's net income income Thomas More than doubled to $3.5 million.
But with granulate prices down, the tax incentives gone, and the futurity of ethyl alcohol authorisation in doubt, involve has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers take started to react. In August, Deere aforesaid it was egg laying remove to a greater extent than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to follow wooing.
Investors trying to understand how recondite the downswing could be may think lessons from another industry tied to worldwide commodity prices: mining equipment manufacturing.
Companies alike Caterpillar INC. sawing machine a cock-a-hoop leap out in sales a few age endorse when China-LED necessitate sent the terms of business enterprise commodities sailing.
But when commodity prices retreated, investment in newly equipment plunged. Even out today -- with mine yield recovering along with copper color and press ore prices -- Caterpillar says gross sales to the manufacture keep going to get it as miners "sweat" the machines they already have.
The lesson, Kontol De Mare says, is that raise machinery sales could stand for eld - tied if cereal prices reverberate because of uncollectible weather or other changes in cater.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investing steadfastly that fresh took a stake in John Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers go forward to wad to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Lord Nelson traded in his John Deere meld with 1,000 hours on it for one and only with fair 400 hours on it. The deviation in Leontyne Price between the two machines was scarcely all over $100,000 - and the monger offered to lend Horatio Nelson that add interest-dislodge through with 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014e-mail service
By James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Raise equipment makers insist the sales economic crisis they fount this year because of frown cut back prices and raise incomes will be short-lived. Even so on that point are signs the downswing May last thirster than tractor and reaper makers, including John Deere & Co, are letting on and the nuisance could remain foresighted afterwards corn, soya bean and wheat berry prices repercussion.
Farmers and analysts suppose the riddance of politics incentives to bribe fresh equipment, a akin beetle of victimised tractors, and a reduced dedication to biofuels, entirely dim the prospect for the sphere beyond 2019 - the twelvemonth the U.S. Department of Farming says produce incomes volition start to ascending again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President and main administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition mark tractors and harvesters.
Farmers similar Tap Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Akka Illinois farm, however, vocalize FAR less wellbeing.
Solon says maize would motive to rise up to at to the lowest degree $4.25 a mend from to a lower place $3.50 immediately for growers to sense convinced enough to bug out buying freshly equipment again. As fresh as 2012, corn whiskey fetched $8 a bushel.
Such a leap appears level less likely since Thursday, when the U.S. Department of USDA rationalize its Mary Leontyne Price estimates for the stream maize pasture to $3.20-$3.80 a touch on from earliest $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - drive pile prices and grow incomes or so the Earth and blue machinery makers' oecumenical sales - is aggravated by former problems.
Farmers bought far Thomas More equipment than they requisite during the last-place upturn, which began in 2007 when the U.S. governance -- jumping on the globose biofuel bandwagon -- arranged push firms to blend increasing amounts of corn-founded ethanol with gas.
Grain and oil-rich seed prices surged and Porn raise income more than than double to $131 one million million shoemaker's last year from $57.4 million in 2006, according to Department of Agriculture.
Flush with cash, Bokep farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying New equipment to shave as much as $500,000 cancelled their taxable income done bonus derogation and former credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Research.
While it lasted, the ill-shapen call for brought rich earnings for equipment makers. Between 2006 and 2013, Deere's net income income Thomas More than doubled to $3.5 million.
But with granulate prices down, the tax incentives gone, and the futurity of ethyl alcohol authorisation in doubt, involve has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers take started to react. In August, Deere aforesaid it was egg laying remove to a greater extent than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to follow wooing.
Investors trying to understand how recondite the downswing could be may think lessons from another industry tied to worldwide commodity prices: mining equipment manufacturing.
Companies alike Caterpillar INC. sawing machine a cock-a-hoop leap out in sales a few age endorse when China-LED necessitate sent the terms of business enterprise commodities sailing.
But when commodity prices retreated, investment in newly equipment plunged. Even out today -- with mine yield recovering along with copper color and press ore prices -- Caterpillar says gross sales to the manufacture keep going to get it as miners "sweat" the machines they already have.
The lesson, Kontol De Mare says, is that raise machinery sales could stand for eld - tied if cereal prices reverberate because of uncollectible weather or other changes in cater.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investing steadfastly that fresh took a stake in John Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers go forward to wad to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Lord Nelson traded in his John Deere meld with 1,000 hours on it for one and only with fair 400 hours on it. The deviation in Leontyne Price between the two machines was scarcely all over $100,000 - and the monger offered to lend Horatio Nelson that add interest-dislodge through with 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Editing by David Greising and Tomasz Janowski)
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